Leading article: A timely warning about dogma and outsourcing

It is not G4S's embarrassed management that deserves sympathy, but the police and the Army

G4S did not take on the Olympics security contract for the money, the firm's chief executive, Nick Buckles, told MPs yesterday. It did it for the sake of its reputation. And it has certainly boosted its name recognition. For many years hence, people in the UK, and not necessarily just here, will remember G4S as the firm that made a dog's dinner out of guarding the 2012 Games.

Even after it has received £57m as a management fee, the firm reckons that it now stands to lose £50m on the contract. As the world's third largest private employer, it can afford the loss. What it cannot afford is the loss of market confidence that has seen its share price fall by 15 per cent.

Although it is a reputational disaster for the firm – and may yet be a disaster for Mr Buckles personally, after his performance before the Commons Home Affairs Select Committee yesterday – it is not G4S's embarrassed management that deserves our sympathy.

Consider what this fiasco means for the members of the armed forces, who learnt this week that thousands of army jobs are to go in the next few years, men returning from duty in Afghanistan who are now being told they must stand in where a private company has failed to fulfil a contract. The people who appear to be angriest of all are the chief constables. They, too, face the loss of thousands of staff, yet they are being asked to provide cover for a firm being handsomely paid to do a job that the police will usually do for far less.

For purposes of comparison, the nation's highest-paid policeman, the Metropolitan Police Commissioner, was paid £260,088 in 2011. The Chief of Defence Staff was paid £240,000. Mr Buckles's pay was recorded in the company's accounts as £830,000, but that does not include bonuses and extras which will have taken his total packet to around £1.2m. He is paid four times as much as the heads of the armed forces and police who must now dig his company out of this mess.

The one thing that can be said in G4S's defence is that it was originally contracted to provide 6,500 security staff, a figure that was revised upwards at the end of last year to an alarming total of 23,000. That was a massive task, but the company undertook to do it and, according to the Home Secretary, Theresa May, gave no warning until 11 July that it was in difficulty. Mr Buckles told MPs that he did not know until 3 July. As recently as 6 July, G4S's account manager for the Games, Ian Horseman-Sewell, told Reuters that the firm would be able to handle an event in Australia at the same time as guarding the Olympics.

Labour politicians naturally ask whether ministers should have been keeping closer tabs on the company. But, at least until other evidence comes to light, the Home Secretary's account seems reasonable. She trusted G4S to deliver and was not given any reason not to.

A bigger political question is about outsourcing, under which private companies are hired to perform tasks previously undertaken by the State in the belief that they will do a better job. There certainly are circumstances in which private firms subject to market discipline outperform agencies of the State – but this has not been one of them. It provides a salutary warning to those who hold an ideological conviction that private is necessarily good, and public necessarily bad.

Finally, there is the question of G4S's £57m fee. "Even after all that has happened, you still want to claim the management fee? I find that astonishing," the Home Affairs Committee chairman, Keith Vaz, exclaimed yesterday. Mr Buckles responded that he did. Perhaps he should think about that a little more as the company nurses its shattered reputation.